Upload
others
View
3
Download
0
Embed Size (px)
Citation preview
Alan Torrance
September 21, 2017
© 2017 CEM Benchmarking Inc.
BenchmarkDC Presentation
for
North Carolina Retirement Systems(for the 5 years ending December 31, 2016)
CEM has been benchmarking U.S. DC plans since 1997.
CEM's 2016 DC database consists of 138 U.S. large, blue chip
corporate and government plans representing $991 billion
in assets and 8.1 million participants.
Plan assets range in size from $72 million to $50 billion. The
median US DC plan has assets of $5 billion and the average plan
has assets of $7 billion.
Participating Defined Contribution Benchmarking assets
in $USD billions
We also benchmark Australian DC plans. However, the
regulatory and competitive environment is quite different
than in the U.S., so their data is not included in this report's
analysis.
0
200
400
600
800
1000
1200
'97 '98 '99 '00 '01 '02 '03 '04 '05 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16
2
This BenchmarkDC report enables plan sponsors to assess and document their
process for reviewing reasonableness of fees as it compares both costs and value
based on the following DC plan success model.
Plan Design
• Design impacts invesment performance.
• Do you provide enough diversification?
• How does your participants' asset mix compare?
Fees
• Are they reasonable? To answer we look at both cost and value production.
• Do you provide low cost alternatives?
Monitoring Investment
Options
• How have your investment options performed?
• Does each of your investment options continue to be a prudent choice?
Participation and Contributions
• Only employees that participate enjoy the benefits.
• Larger contributions mean more money at retirement.
Services and Communication
• Engaged members are likely to contribute more and make good investment decisions.
• Do you provide advice? How does your communication compare?
Fiduciary and Governance
• Fiduciaries control plan operations.
• You need the right people and processes to effectively manage.
Note: page references throughout this presentation refer to the full BenchmarkDC report.
From page 15 of full report 3
Peers
County of Los Angeles (457) Minnesota State RS
Federal Reserve OEB North Carolina RS
Florida State Board of Administration Ohio Public Employees Def. Comp.
Indiana Public RS State of Tennessee
Maryland Supplemental Retirement Plans Utah RS
Michigan Office of Retirement Services Virginia RS
Your peer group is comprised of 12 DC plans, with assets ranging from $2.3 billion to $11.8 billion versus your $9.8 billion.
Your peer group is used to benchmark your costs.
The most valuable comparisons for cost performance are to your custom peer
group.
The names of the above fund sponsors in your peer group are confidential and may not be disclosed to third
parties. All other information in this report is confidential and may not be disclosed to third parties without
the express written mutual consent of CEM Benchmarking Inc. and North Carolina Retirement Systems.
From page 18 of full report 4
Comparison of plan characteristics
# of plan sponsors
Plan assets
- Smallest to largest
- Median
- Median excluding employer stock
Account balance of average participant
- Median
- Median excluding employer stock
Average # of plan participants
% retired or separated with assets in plan
Average % of assets in employer stock
Average % of assets indexed
Average # of investment options
Corporate, Public
28% 26%
$33,000
298,337
$122,000
58,743
16
110 Corp, 28 Public
13
Public
0%
31%
0 Corp, 12 Public
0%
$33,000
$4.2 BN
$135,000
$6.7 BN
$48,000
138
$9.8 BN $72 mil - $49.6 BN
$4.8 BN
$9.8 BN
$9.8 BN
By design your peers are similar to your plan in assets and average account balance
because these factors impact costs.
52%
14
10%
59%
12
$2.3 BN - $11.8 BN
$6.7 BN
20%
$48,000
154,084
Your plan
1
U.S. universePeers
From page 18 of full report 5
Highlights
Plan Design
•
•
Returns
•
Fees
• Your total plan cost of 0.47% was above your benchmark cost of 0.40%. Your costs are higher mainly because:
Added cost from active versus indexed options
Participation and Contributions
•
•
Services and Communication
•
Fiduciary and Governance
•
Relative to your peers, your participation rate (your 33% of eligible employees versus 70% peer median) is lower and your
contribution rate (your employee average contribution of 54% per active participant versus 51% peer median) is higher.
You do not offer the services of a financial adviser. All of your peers offer both computer based financial advice and financial
advisers. Though what is important and valuable to your participants may differ than those of your peers. Though your plan does
offer education sessions via group and one-on-one.
Your fiduciary and governance process appears to be well documented.
Your plan has 13 investment options (we count Target Date funds as one option) which compares to a peer average of 13.8 and a
U.S. Universe average of 16.4. Your default option is your GoalMaker which is similar to target retirement date funds. Target retirement date funds are the
default option for 83% of your peers and 84% of U.S. universe plans.
Your 5-year total net return was 8.5%. This compares to the U.S. Universe average of 8.7% and peer average of 7.8%. Your plan
had more assets in U.S. stock options which performed well over this period but that was offset by more stable value asset which
had lower returns.
Within your Plans 59.8% of participants use GoalMaker and 43.0% of total Plan assets are in GoalMaker portfolios. The Plan
offers these portfolios in lieu of custom target date funds. By way of comparison, 16.0% of assets, on average, are held within
target date funds, within your the peer group.
6
Type and number of investment options
Employer Stock
Stock U.S.
Stock Non U.S. & Global
Bonds
Stable Value
Cash, Money Market
Target Retirement Date
Balanced
Mutual Fund Window
Participant Brokerage Account
Priv Eq, REIT, Other
Total
Default option
Balanced
Target Retirement Date
Managed accounts
Stable Value
Money Market
Other
No default option
Total
The default option is important as behavioural research shows
that participants will often opt for the default investment
option.
U.S.
Universe
7%
0.9
0.2 0.1
0.4 0.4
0.7
1 0.5
100%
7%
100%
Your
Plan
Yes
8%
83%
Peer
Average
0.6 0.6
2 2.5 2.7
1 1.0 0.7
6 5.2 6.0
3 2.0 2.7
Asset mix is a primary driver of long term returns. Asset mix
depends on the investment options available. You have 13
investment options compared to a peer average of 13.8 and a
U.S. universe average of 16.4.
Choosing an investment line up and the default option are two of the most
important plan design decisions you have.
Your Peer Universe
Plan Average Average
0.0 0.7
1%
0%
0%
0%
0%
8%
Your default option is similar to target retirement date funds.
North Carolina Supplemental Retirement Plans offer GoalMaker
as an asset allocation service for no additional cost provided by
Prudential, it helps members allocate balances to thirteen
investment options that are best suited to their risk profile. This
service rebalances assets quarterly. Target retirement date
funds are the default option for 83% of your peers and 84% of
U.S. universe plans.
84%
1%
1%
0%
More and more plans are also realizing offering a decumulation
option is also important. You do offer a guaranteed lifetime
income product. It is offered out of the plan by 58% of your
peers and 18% of the U.S. universe.
0.9
13 13.8 16.4
0.8 0.9
From page 53 of full report 7
Asset Mix -Your Plan
Stock Non U.S.
Employer Stock
Bonds
Stable Value
Cash, Money Market
Priv Eq, REIT, Other
Self-dir. Windows
Asset Mix - Peer Plans
Stock U.S.
Stock Non U.S.
Employer Stock
Bonds
Stable Value
Cash, Money Market
Priv Eq, REIT, Other
Self-dir. Windows
The tables below compare your participants' average asset mix relative
to the Peer average.
Target & Balanced *
Stock U.S.
As fiduciaries, reviewing allocation to stable value and cash should
be done regularly.
Your plan participants' cash and stable value holdings were 32% in
2012 and 25% in 2016. In comparison, the peer average cash and
stable value holdings were 26% in 2012 and 19% in 2016. 11%
32%
0%
0%
0%
2012
0%
45%
13%
0%
10%
27%
0%
3%
0%
2013
0%
45%
15%
0%
10%
26%
0%
4%
0%
2014
0%
46%
15%
0%
11%
26%
0%
4%
0%
2015
0%
45%
15%
0%
11%
25%
0%
4%
0%
2016
0%
44%
15%
0%
14%
24%
3%
2%
1%
2012
19%
31%
7%
0%
2%
3%
1%
2014
18%
38%
8%
0%
12%
18%
2%
2%
1%
2013
20%
36%
8%
0%
Target & Balanced *
* 43% of North Carolina Supplemental Retirement Plans DC Assets
are in GoalMaker. GoalMaker is an asset allocation service for no
additional cost provided by Prudential, it helps members allocate
balances to 13 investment options best suited to their risk profile
and time horizon. This service rebalances assets quarterly.
13%
16%
2%
3%
2%
2016
19%
37%
8%
0%
13%
17%
2%
3%
1%
2015
19%
37%
8%
0%
13%
17%
8
5-year
U.S. universe90th %ile75th %ileMedian25th %ile10th %ile
Count—Average—Peer Average Your plan
88
7.8%
10.6%
2016
9.3%7.9%7.1%6.3%1388.4%7.2%7.1%
Your plan participants' average 5-year total net return was 8.5%.
10.9%9.9%8.5%
8.5%
As a fiduciary, it is important to understand why the average
total net return performance of your plan differs from other
plans over time.
Average total net return measures the change in the average
participants' account balance as a result of their weighted
investment returns.
Average annualized total net return
of plan participants
7.7%6.7%
8.7%
0%
2%
4%
6%
8%
10%
12%
From page 22 of full report 9
Reason
Total (equals your participants' return minus the peer average)
0.1%Higher asset category returns (selection). Asset category returns reflect investment option performance
and the mix of option styles in the category.
Reasons why your 5-year total net return was above the peer average
0.8%
All other differences 0.1%
+Increased/-
Decreased
Your Return
Higher asset mix returns (allocation). On average, your participants were in more of the higher, and
fewer of the lower, performing asset categories.
0.6%
10
5 year Average Asset Mix
Total
Employer Stock
Stock U.S.
Bonds
31%
13%
45%
0%
0%Target & Balanced *
The primary reason for differences in net total return are caused by differences in
asset mix and asset category returns.
The best performing asset category of the past 5 years was U.S.
Stock, which had an average category return of 14.5%. This
compares to the poorest performing asset category return of
0.2%, which was cash.
Differences in asset category return reflects both investment
option performance and the mix of styles (for example broad,
mid cap) in the category.
Your 5 year asset mix is compared to your peers and the U.S.
universe on the table below.
Average net returns by major asset category
(5-years ending Dec 2016, annualized)
* 43% of North Carolina Supplemental Retirement Plans DC Assets are in
GoalMaker. GoalMaker is an asset allocation service for no additional cost
provided by Prudential, it helps members allocate balances to 13 investment
options best suited to their risk profile and time horizon. This service
rebalances assets quarterly.
Stock Non U.S. & Global
Priv Eq, REIT, Other
Stable Value
21%
1%
7%
8%
15%
Cash, Money Market 4%
100%
8%
13%
21%
2%
100%
U.S. Universe
Average
100%
Your Plan
2%
14%
10%
29%
0%
Peer Average
36%
0%
19%
1%
0%
2%
4%
6%
8%
10%
12%
14%
16%
Stock U.S.Employer
StockTarget &Balanced
Priv Eq,REIT,Other
Stock NonU.S. &Global
BondsStableValue
Cash,MoneyMarket
Your 14.4% 7.9% 3.4% 2.1%
Peer 14.9% 7.4% 10.9% 6.6% 2.8% 2.0% 0.2%
Univ. 14.5% 13.0% 8.2% 6.4% 6.3% 2.5% 2.1% 0.2%
From page 23 of full report 11
Your plan's total cost was 0.47% of total plan assets or $149 per participant.
90th %ile
75th %ile
Median
25th %ile
10th %ile
Count
— Average
Your plan
PeersU.S.
universe
0.26%0.18%0.15%
$238$210$145$109$70
Your peers' average total cost was 0.34% of total plan assets or
$160 per participant.
As a fiduciary, it is very important that you assess whether your
costs are reasonable. But comparing total plan costs provides
only limited insight because differences in total cost primarily
reflect differences in asset mix, plan size and average account
balance.
as a % of plan assets
0.36%0.26%
0.47% 0.47%
$ per participant
Total plan cost 2016
Peers0.47%0.41%
0.54%0.39%
U.S.
universe
1380.31%
0.24%12
0.34%12
$160$149
$611$472$330$219$120138
$385$149
0.0%
0.1%
0.2%
0.3%
0.4%
0.5%
0.6%
$0
$100
$200
$300
$400
$500
$600
$700
From page 31 of full report 12
Trend analysis is based on the 106 universe funds and 15 peers with 5
consecutive years of data.
Your total plan costs have been relatively stable over the past 5 years.
Trend in total plan costs - % of assets
Trend in Total Plan Costs - $ per participant
Total plan costs have decreased for the U.S. universe, from
0.35% of plan assets in 2012 to 0.29% in 2016.
The primary reason for the decline is that indexed assets
increased from 51% of total 'indexable assets' in 2012 for the
U.S. universe to 60% in 2016.
0.00%0.10%0.20%0.30%0.40%0.50%0.60%
2012 2013 2014 2015 2016
You 0.46% 0.49% 0.50% 0.50% 0.47%
Peer 0.37% 0.36% 0.31% 0.32% 0.30%
Univ 0.35% 0.33% 0.31% 0.30% 0.29%
$0
$100
$200
$300
$400
$500
2012 2013 2014 2015 2016
You $111 $130 $169 $144 $149
Peer $147 $154 $145 $140 $133
Univ $377 $408 $429 $417 $417
From page 31 of full report 13
Your total plan cost versus benchmark
Total plan cost
Peer-based benchmark cost
Excess cost
Reasons for your plan's higher cost
Reason $000s
Paying similar for similar-style investment options
Added cost from active versus indexed options
Higher administrative expenses
Less assets in mutual fund windows
Adjustment for economies of scale, advantage
Total excess cost
0.00%
$44,392 0.47%
$37,746
-$35 0.00%
$196
$2,497 0.03%
$6,646 0.07%
$3,631 0.04%
$356 0.00%
Are your total plan costs reasonable?
+Excess/-Savings
%
0.40%
$6,646 0.07%
$000's %
CEM calculates a benchmark cost for your plan based on the
median cost that your peers pay for your plan participants' mix of
investment options. Your total plan cost was 0.47%. This was 0.07%
above your peer-based benchmark cost of 0.40%.
Being high or low cost is neither good nor bad in and of itself. But
as fiduciaries you should understand where and why you are paying
more (or less) than peers and be comfortable that you are receiving
value for what you are paying. Reasons for your plan's 0.07% excess
cost are summarized in the following table.
From page 33 of full report 14
Indexed options by asset class¹
U.S.
Stock U.S. Broad or Large Cap
Stock U.S. Small Cap
Stock U.S. Mid Cap
Stock Non U.S. & Global
Bonds
Target & Balanced
1. An option is considered indexed when the percent of passive management is greater than or equal to 80%.
Cost Savings from Indexed Options
Asset Class
Stock U.S. Broad or Large CapStock U.S. Small CapStock U.S. Mid CapStock Non U.S. & GlobalBondsTarget & Balanced
2. Costs include investment management fees only.
Performance of Indexed vs. Active Options
Asset Class
Stock U.S. Broad or Large CapStock U.S. Small CapStock U.S. Mid CapStock Non U.S. & GlobalBondsTarget & Balanced3. Includes only funds with 10 consecutive years of data for each asset class.
Costs impact long term returns and are controllable. One way of reducing costs is
to offer indexed options.
-0.18%
Indexed
-0.06%
0.05% 0.30% 0.26%0.09% 0.36%
0.05%
0.28%
0.05% 0.63% 0.58%0.09% 0.58% 0.50%
0.03% 0.42% 0.40%0.65% 0.60%
66% Yes
U.S. Universe Average Cost²
Indexed Active Savings
50% Yes
43% Yes
Yes 75% Yes 79% Yes
Yes 67% Yes 78% Yes
Universe
Yes 92% Yes 97% Yes
50% Yes 55% Yes
Most plans offer a number of indexed options as
does your plan.The middle table indicates the cost
savings from using indexed options versus active
mandates.
Though past performance is not an indicator of
future performance, our U.S. universe of
participants' active mandates have generally
outperformed indexed mandates even after costs
have been taken into account.
Does your plan offer an
indexed option for: Your plan Peer
Yes 33% Yes
-0.05%
Active
U.S. Universe Average
10-year Net Value Added³
-0.28%0.51%0.32%0.32%0.25%
-0.15%
0.03%0.05%0.11%
0%
20%
40%
60%
80%
2012 2013 2014 2015 2016
You 40% 29% 30% 30% 31%
Peer 50% 51% 54% 55% 57%
Univ 51% 54% 56% 58% 60%
Indexed options as a % of indexable assets⁴
From page 54 of full report 15
Paying administration expenses from the expense ratio of investment options
Allocating expenses
a. An asset based fee
b. A flat fee per participant
c. A combination of asset based fee and flat fee
d. Other
The table below compares how administration expenses are paid and allocated.
This is a potential fiduciary risk area as there can be fee allocation disparity.
When administration expense is paid from
the expense ratio of investment options
some investment options pay more as a
percentage of assets.
Participants with larger balances usually
pay a higher dollar cost eventhough the
largest administration cost,
recordkeeping, tends to be priced per
participant.
14% 14%
You Peers Universe
How are the recordkeeping or administration costs
allocated to participants?
You Peers Universe
0% 0%
29% 26%
Yes 57% 61%
U.S.
U.S.
Plans that pay all or part of administrative expenses from the
expense ratio of investment options Yes 33% Yes 53% Yes
From page 63 of full report 16
Investment Option
Low Avg High Low Avg High Low Avg High Low Avg High Low Avg High
BlackRock - NC Large Cap Passive Fund 1 0 0 0 0 1 1 0 0 0 1 0 0 0 0 1 1 0 0 0 1 0 0 0 0
Multi-Mgr - NC Large Cap Growth Fund 1 1 1 1 0 2 0 0 0 0 1 1 0 0 0 1 1 0 0 0 2 0 0 0 0
Multi-Mgr - NC Large Cap Value Fund 1 1 1 0 0 1 1 1 1 1 1 1 1 1 0 1 1 1 0 0 1 1 1 0 0
BlackRock - NC SMID Cap Passive Fund 1 0 0 0 0 1 1 1 0 0 1 1 1 0 0 1 1 0 0 0 1 1 1 1 0
Multi-Mgr - NC SMID Growth Fund 1 1 1 1 0 1 1 0 0 0 1 1 1 1 0 1 1 0 0 0 1 1 1 0 0
Multi-Mgr - NC SMID Value Fund 1 1 1 0 0 1 1 1 1 1 1 1 1 0 0 1 1 1 1 0 1 1 1 1 0
Multi-Mgr - NC International Equity Fund 1 1 0 0 0 1 1 1 1 0 1 1 1 1 0 1 1 0 0 0 1 1 1 0 0
BlackRock - NC International Passive fund 1 0 0 0 0 1 1 1 1 0 1 1 0 0 0 2 0 0 0 0 2 0 0 0 0
Multi-Mgr - NC Global Equity Fund 1 1 1 1 1 1 1 1 1 0 1 1 1 0 0 1 1 1 1 1 1 1 1 1 1
Multi-Mgr - NC Fixed Income Fund 1 1 1 0 0 1 1 1 0 0 1 1 1 0 0 1 1 1 1 0 1 1 0 0 0
BlackRock - NC Fixed Income Passive fund 1 0 0 0 0 1 1 0 0 0 1 1 1 0 0 1 1 1 1 1 1 0 0 0 0
Galliard - NC Stable Value Fund 1 1 1 1 0 1 1 1 1 0 1 1 1 0 0 1 1 1 0 0 1 1 1 0 0
PIMCO - Inflation Responsive Fund 1 1 1 1 1 1 1 1 0 0 1 1 1 1 0 0 0 0 0 0 0 0 0 0 0
Performance highlighted in red if costs are higher than 90% of the peers' costs, or if returns or value added are in the bottom 10% relative to the universe
1.1%
0.86% 0.58% 10.5% 9.3% 3.7% 0.3% n/a 0.1% n/a -0.6%
0.34% 0.29% 2.0% 1.8% 1.0% 1.0% 2.1% 2.0% 1.0%
0.8%
0.02% 0.04% 2.6% 2.6% -0.1% -0.1% 2.9% 2.2% -0.1% -0.1%
0.16% 0.25% 4.0% 3.4% 1.3% 0.7% 3.7% 3.0% 0.6%
0.1%
0.55% 0.52% 6.0% 2.9% -2.5% -2.6% 11.8% 11.2% 1.9% 0.4%
0.03% 0.07% 5.1% 4.7% 0.1% 0.4% 4.9% 5.7% -0.5%
-0.2%
0.45% 0.50% 5.5% 1.3% 0.5% -1.0% 6.0% 7.0% 0.5% 0.6%
0.61% 0.64% 20.6% 11.1% -4.6% -2.5% 16.1% 14.0% 1.0%
0.0%
0.66% 0.64% 8.6% 11.1% -1.1% -2.5% 13.3% 14.0% -0.6% -0.2%
0.01% 0.05% 17.7% 16.2% 0.1% 0.0% 14.5% 15.0% 0.1%
0.1%
0.38% 0.39% 16.8% 8.3% -0.5% -2.7% 14.9% 14.8% 0.1% 0.1%
0.42% 0.39% 0.4% 8.3% -6.7% -2.7% 13.6% 14.8% -0.9%
11.9% 12.0% -0.1% 0.0% 14.5% 14.6% -0.2% 0.0%
Your Med Your Med Your Med
The table below compares your individual investment options relative to your peers
for cost and the U.S. universe for performance. Pay particular attention to your
default option and those with outlier (highlighted in red) characteristics.
The ranking scale of 5 boxes are as follows: lowest and highest boxes are the bottom 10% (Low), top 10% (High). The mid boxes are divided into 3 approximately equal segments:
10%-36% (Below Average), 36%-63% (Average), 63%-90% (Above Average).
Net Value Added 5-yearUniv Rank vs. Univ Univ Rank vs. UnivRank vs. UnivPeer Rank vs. Peer Univ Rank vs. Univ Univ
Cost, Invest. Mgr. 2016 Net Return 2016 Net Value Added 2016 Net Return 5-year
Your Med Your Med
0.01% 0.02%
From page 10 of full report 17
5-yearU.S. universe
—Average—Peer Avg Your plan
138-0.5%
-0.4%-0.8%
-0.1%-0.2%
880.1%
0.3%
Your plan's total net value added from all investment options was -0.8% in 2016
and 0.3% for the 5 year period ending 2016.
1. Employer stock's value added impact was
neutralized by setting its benchmark return equal to its
actual total return.
90th %ile75th %ileMedian
Total plan net value added
0.7%0.3%0.1%
0.3%
2016
0.3%0.1%-0.3%-0.9%-1.7%10th %ile
Count
25th %ile
Though we look at each of your investment options'
performance in detail previously, it is also useful to review your
plan's total net value added performance in aggregate.
Monitoring total plan value added serves a very different
fiduciary purpose than monitoring the value added from
individual investment options. Total plan value added shows
you whether your process for adding and dropping investment
options over time has been effective.
-2.0%
-1.5%
-1.0%
-0.5%
0.0%
0.5%
1.0%
From page 28 of full report 18
Some factors that impact participation rates:
• Participation and Contribution rates
Low Avg High
• Participation rates1 1 0 0 0
1 1 1 0 0
0 0 0 0 0
•
Contribution rates1 1 0 0 0
1 1 0 0 0
Some factors that impact contribution rates: • 1 1 1 0 0
•
•
n/a 84% n/a
High participation and high contributions results in more retirement assets for
more members and can be useful for evaluating DC plan success.
Your
%ileMedianPlan
Rank vs. PeersPeer
33% 70% 30%
54% 51% 60%
Whether participation is mandatory.
Participation is mandatory for 10% of your
peers.
Employer contributions per active participant
Employee contributions per active participant
Average account balance per participant
% receiving maximum employer match
% making voluntary contributions
% of eligible employees that participate
Whether the DC plan is the primary or
supplemental retirement savings vehicle
for participants.
Your plan is considered supplemental.Auto enrollment. Your plan does not have
auto enrollment. 36% of peer plans have
auto enrollment.
Initial default participation rate with auto
enrollment.
$747 $1,118 30%
$1,432 $2,438 18%
Automatic increases in deferrals. Of the
68% of plans with auto enrollment, 35%
had automatic increases. Your plan did
not answer the questions about
automatic increases.
$32,738 $48,135 36%
The initial default participant deferral rate
for your peers is 5.0%.
Incentives such as employer match. Your
plan had an employer match. 82% of the
U.S. universe has an employer match.
From page 12 of full report 19
Your Peer UniversePlan Average Average
No 50% yes 67% yes
n/a 0% yes 19% yes
n/a 0% yes 5% yes
n/a 100% yes 76% yes
Yes 100% yes 79% yes
Yes 100% yes 64% yes
No 42% yes 33% yes
Yes 92% yes 86% yes
Yes 33% yes 38% yes
Yes 92% yes 82% yes
Yes 58% yes 70% yes
No 42% yes 19% yes
n/a 0% yes 34% yes
Services you provide, particularly education and advice, are key to participant success
and also impact costs.
a. Increase employee deferral rates?
Does your plan have marketing campaigns to:
b. Increase participation by eligible non-
participants?
d. Improve diversification from employer
stock?
a. In their participant statements
b. Online
c. Via separate communication
c. Educate on savers tax credit?
Do participants receive projections of annual
income in retirement:
a. Group meetings
b. Individual meetings
Is individual financial counseling/investment
advice available?
If yes, is it provided via:
a. A computer-based model
b. Investment advisers
c. Both computer and investment advisers
Does your plan offer financial education via:
From page 60 of full report 20
Fiduciary structure, process and documentation
a. The Board of Directors of the plan sponsorb. A specified title or person such as the CEO or CFOc. A committeed. Other
If a committee is the named fiduciary:a. Number of committee membersb. Number of committee meetings in the past yearc. Are the minutes of each meeting documented
Are the 'named' fiduciaries:a. Provided with formal training as to their role and responsibilitiesb. Required to sign an 'acknowledgement of responsibility' form
Have third-parties been appointed as fiduciaries to serve as:a.
b.c.
Is there documentation that identifies the process for:a. Selection and monitoring of third-party fiduciaries and other plan service providersb. Investment policyc.
d. Fulfilling administration responsibilities (regulatory filings, disclosures to participants) Yes 92% yes 79% yes
Yes 100% yes 95% yes
Oversight of internal employees involved in operating the plan (i.e., internal fiduciaries, HR
staff enrolling employees in the plan, posting deferrals, etc.) Yes 83% yes 76% yes
Yes 100% yes 82% yes
Investment advisor to provide advice regarding the selection and retention of plan Yes 83% yes 56% yes
Plan administrator responsible for regulatory filings, disclosures to participants and hiring
plan service providers if no other fiduciary has that responsibility Yes 58% yes 32% yes
Investment manager with full discretionary powers for selecting, monitoring and replacing
the plan's investment options Yes 25% yes 8% yes
Yes 73% yes 29% yesYes 83% yes 86% yes
Yes 100% yes 99% yes
9 7.3 6.010 9.7 5.4
Yes 27% yes 79% yes9% yes 5% yes
55% yes 13% yes9% yes 3% yes
Fiduciary structure and good governance are also key to DC plan success.
U.S.
Who are the fiduciaries named in the plan document as having control over the plan’s operation
(If the employer sponsoring the plan is named, indicate who currently acts as the internal
fiduciary on behalf of the employer):
UniversePeersYou
From page 62 of full report 21
Cost impact of paying more/-less for your plan's investment options
Average
Provider - Option Name
BlackRock - North Carolina Large Cap Passive Fund Stock U.S. Large Cap - indexed
Multi-Mgr - North Carolina Large Cap Growth FundStock U.S. Large Cap
Multi-Mgr - North Carolina Large Cap Value Fund Stock U.S. Large Cap
BlackRock - North Carolina SMID Cap Passive Fund Stock U.S. Mid Cap - indexed
Multi-Mgr - North Carolina SMID Growth Fund Stock U.S. Mid CapMulti-Mgr - North Carolina SMID Value Fund Stock U.S. Mid Cap
Multi-Mgr - North Carolina International Equity FundStock Non U.S.
BlackRock - North Carolina International Passive fundStock Non U.S. - indexed
Multi-Mgr - North Carolina Global Equity Fund Stock Global
Multi-Mgr - North Carolina Fixed Income Fund Bonds Broad
BlackRock - North Carolina Fixed Income Passive fundBonds Broad - indexed
Galliard - North Carolina Stable Value Fund Stable Value (ex GIC)
PIMCO - Inflation Responsive Fund* OtherTotal 196
1. The stock asset classes combine the styles: growth, value, broad. Therefore, one reason costs may be higher or lower is differences in proportions of these
styles. Starting on page 40 costs are compared on an uncombined basis by style.
0.61%
-0.01%
0.01%
0.03% -0.05%
-0.05%
0.55% 0.02%
-0.02%
0.34%
0.86% 0.00%
CostPeer
Median
0.02%
0.05%
-0.04%0.02%
0.04%
0.29%
-0.04%
-0.09%
Asset Class¹ &
Implementation Style
0.02%
0.42% 0.03%
0.38%
0.16%
Your
Plan
0.01% -0.01%
0.66%
0.45%
-100
70-165
-298
-20
186
-543
-81
1,155
233
358467
563
46
809
625
406
2,407
(A X B X 1000)in $000s
-SavingsCost/
1,332
888
-176
281
904
Assets
$mills(B)
-112
9,415
0.39%
0.39%
0.05%
0.64%0.64%
0.50%
0.07%
0.52%
0.25%
0.86%
More/
-Less(A)
0382
Appendix A - Reason 1: Paying same for similar-style investment options
From page 34 of full report 22
Cost Impact of Investment Options Being More/-Less Actively Managed
% Actively Managed
Your Peer
Indexable Option Types1Plan Average3
(B) (C)
Stock U.S. Mid CapStock Non U.S.Stock GlobalBonds Broad
TotalTotal as a % of plan assets
1. Only option types where both indexed and active management styles are relevant are shown. Thus employer stock, stable
value funds and loans are excluded from assets for the purpose of this comparison.
2. The active premium is the additional cost of external active management relative to passive management for each asset
class (based on the peer group).
3. The total peer average is weighted by your plan's assets in indexable options. The total peer average is 48% when
weighted by each peer's assets in indexable options.
4. Cost/-Savings for each option type equals the amount by which you are more/-less actively managed than the peer
average, multiplied by the active premium multiplied by your plan's average assets in the option type.
6,62769% 56%
0.21% 60.1% 1,03147.6% 2700.52% 100.0% 809100.0%0.43% 92.6% 60955.7% 964
0
Stock U.S. Broad or Large Cap 56.8% 45.3%(A) (D)
0.37% 3,123
Premium2 $mills
Average
Active Assets
0.59% 1,057
A x (B-C) x Din $000s4-Savings
Cost/
1,3291,06977.7% 60.6%
The active premium is
the incremental cost of
active management
relative to indexed
options (based on peer
costs).
3,6310.04%
Appendix A - Reason 2: Added cost from active versus indexed options
From page 35 of full report 23
Cost impact of differences in administrative expenses
Peer
Administrative Service Benchmark¹(B)
Total administrative expenses after rebates 356.4
1. Peer Benchmark = Peer median admin cost per member ($41) x Total
number of your fund's members (298,337) / Your fund's average holdings
Your plan's total administrative expenses
were 0.13% of total plan assets. This was
the same as the comparable peer median
cost of 0.13%.
Appendix A - Reason 3: Equal administrative expenses
0.13%
Cost as a % of plan
assets
Cost/ -Savings
Plan
Your
(A)0.13%
$000s
0.00%(A - B)
%
From page 36 of full report 24
Appendix A - Reason 4: Lower mutual fund window assets
Cost Impact of Mutual Fund Windows (MFW)
$000sCost/ -Savings
-$35
Your Peer More/ MFWMFW Assets as a % of Total Assets
0.00%
Plan Average -Less Premium¹ %(A) (B) (A X B)
0.0% 0.1% -0.1% 0.61%
From page 37 of full report 25
If you have any questions, please contact:
Alan Torrance
372 Bay Street, suite 1000
Toronto, Ontario
Canada, M5H 2W9
www.cembenchmarking.com
26
To: Supplemental Retirement Board of Trustees From: Mary Buonfiglio, Deputy Director, Supplemental Plans Date : September 21, 2017 Re: CEM Benchmarking Report
The CEM Benchmarking Report is a valuable tool for the Supplemental Retirement Board of Trustees (Board) and staff to help assess the Plans’ performance. The report’s value lies in its analysis of several important Plan features that are monitored by the Board, including fees, fund performance and Total Net Value Added. This memo shares some observations from the report that highlight matters important to the Board and the oversight of the North Carolina Plans.
Active and Passive Management Styles Report Finding: While cost is not the only factor to be considered in the assessment of performance, the Plan cost of 0.47% is higher than the benchmark cost of 0.40%. This is primarily due to the use of active versus indexed investment options. Observation: Plan expenses will be reduced upon the completion of the Plan Design project scheduled for September 29, 2017. At that time, four white label funds will be closed and two new funds will be created, which hold a greater proportion of indexed assets. In the NC Large Cap Core Fund, investment management fees will decrease from the two former fund fees of 0.37% and 0.43%, to 0.31% on nearly $2 billion in Plan assets. In the NC SMID Cap Core Fund, fees from the two former fund fees of 0.55% and 0.63% will be replaced with a new fee of 0.55% on approximately $1 billion. Stable Value Holdings Report Findings: While the Plans’ five‐year total net return of 8.5% compares favorably to the U.S. average of 8.7% and peer average of 7.8%, performance was offset by more stable value assets, which had lower returns.
Observation:
The weighting to NC Stable Value Fund is higher than the peer group, which points to an opportunity for targeted messaging to participants (particularly those who “defaulted” into SV prior
to 2010) who steadfastly remain in the NC Stable Value Fund, encouraging them to reassess whether their asset allocations continue to match their retirement plans and risk profile. GoalMaker continues to be an effective tool for assisting participants who would like help in determining the appropriate asset mix for their retirement savings.
Early career participants have been of particular concern to the Board and staff. Staff has analyzed our participant data and determined that, of the approximate 43,000 Plan participants age 25 to 34, 90% hold 5% or less of their total assets in the NC Stable Value Fund. The remaining (approximately 10%) have a higher percentage of their portfolio in the NC Stable Value Fund, representing as much as 35%.
In addition, the “Target & Balanced Fund holdings” reported on page 8 of the CEM Benchmarking Report contains holdings that include stable value funds. This could lead to an under-reporting of the actual percentage of stable value assets represented in peer plans.
Administrative Costs
Report Findings: The Plans’ administrative fees average $149 per participant, compared to the peer average of $160, and the universe average of $383. When converted to basis points, Plan administrative fees are 0.47%, versus a peer average of 0.34%, and a universe average of 0.30%.
Observation: The NC Supplemental Plans have an average participant account balance of $33,000, versus the peer average of $48,000 and the universe average of $136,000. This difference in average account size explains the difference in the dollar-versus-basis point fee analysis.
As detailed in Mercer’s Recordkeeper Benchmarking Report presented to the Board in March, an important factor to consider in the analysis of administrative fees is the service level provided by the Plans’ recordkeeper. In particular, the Plans’ 16 field educational counselors provide a significant resource for one-on-one, confidential educational assistance to support participants and potential participants, as well as the nearly 1000 employers who offer the Plans.
Summary
Staff find significant value in the CEM Benchmarking Report and hope to continue to use this resource in discussions with the Board about opportunities to better meet the needs of participants, potential participants, and employers.